Interview – The key to India’s agri reforms lies with states

Shashanka Bhide

Shashanka Bhide

The Indian government has kept away a tidy sum of money in this year’s budget for the beleaguered agriculture sector, and said it plans to double farmer income in five years.

IndoAsiancommodities.com spoke to Shashanka Bhide, director of Madras Institute of Development Studies, for his views on the government’s plans. Excerpts from the interview:

“A lot of measures such as 100 per cent FDI in retail food processing, direct benefit transfer (DBT) in fertilizer subsidy on a pilot basis, focus on irrigation to bring in more land with assured water availability, crop insurance, soil health card have been announced in the budget

We do not know what will happen in the budget prepared by the states. Most of the schemes are dependent on the allocation provided by states from their own budgets because they have to share 40-50 per cent in most of the Central schemes.

What the states government would do we do not know, as they have to distribute their resources among a host of sectors and priorities differ from state to state. Irrigation has been given a focus, but very little has been heard about electricity for the agriculture sector. Both go hand-in-hand.

The best growth in agriculture was close to 4 per cent during the 11th Five Year Plan. This was one of the best performances in independent India. The growth in last two years got a setback due to poor monsoon rains.

We cannot take for granted that there would be 4 per cent agricultural growth every year when 55 per cent of the land does not have irrigation and is completely dependent on monsoon rains. Though investment in irrigation is a welcome step which is necessary, there are structural constraints like small land holdings which need to be addressed.

That expectation of a huge growth in agriculture income seems unrealistic. The dependence on agriculture for job creation has to change. That is not going to happen with this kind of investment in agriculture. But making that growth (farm income) possible depends a lot on what happens in non-agriculture sector.

To double the income in five years, the growth has to be 15-20 per cent every year as lowering of the input costs has also a limit. I do not foresee such a huge demand happening in agriculture sector.

However, the biggest problem agriculture sector is facing in India is poor demand for farm products. The growth rate of demand for farm-products is comparatively lower than that of non-farm products. In that sense, the demand factor plays a significant role in agriculture growth.

So, increasing agriculture growth depends on improving the demand for farm-products and the government has to see where that demand will come from. That does not seem to me very clear from the current policy in agriculture.

One of the areas for income growth in agriculture in the past is from diversification of food – moving towards high-value horticulture crops. The budget talked about many long-term plans for scaling up income and missed out some of the short-term measures that require immediate attention.

Policy on soil health card and crop insurance are both welcome and need to be lauded. But what we need more is expansion of the insurance as it protects income of the farmers.”

 

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